. NR Industries has 150,000 shares of common stock outstanding. The stock is cur

Question

. NR Industries has 150,000 shares of common stock outstanding. The stock is currently selling for $33.50 a share. The firm also has 2 bond issues outstanding. The first bond issue has a total face value of $2,500,000, pays 9.5 percent interest annually, and currently sells for $1,030. The second bond issue consists of 7,500 bonds that are selling for $960 each. These bonds pay 8 percent interest annually and mature in 11 years. The tax rate is 34 percent. What is the capital structure weight of the firm's common stock? (Hint: Assume each bond has face value of $1,000.)

a. 33.66 percent

b. 33.71 percent

c. 33.80 percent

d. 33.95 percent

e. 34.07 percent

please provide detailed steps..thanks

Explanation / Answer

d. 33.95 percent

reason:

total capital

150000*33.5+2500*1030+7500*960 = 14800000

common stock = 150000*33.5 = 5025000

common stock weight = 5025000/14800000 = 33.95%

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